Stocks closed out a record week with the Dow down 2 points to 21,080 on light trading volume. Both the NASDAQ and S&P 500 hit record highs. For the week the Dow gained 1.3% or 273 points and is just below a record high. Volume fell as traders bolted for the Hamptons for the Memorial Day weekend.
Costco Warehouse reported earnings and the results speak for themselves. Shares jumped as revenue grew 8% and net income rose by 13%. The results were much better than the gurus had expected as strong US and international comp store sales, higher earnings from fuel sales and benefits from Costco’s new Citi Visa branded credit card drove results. It seems that within the retail industry, Amazon, Costco and Walmart are emerging as the “big three”.
While out of town the past couple of days I missed the news that Moody’s had downgraded China from Aa3 to A1. The reason behind the call was concern over structural reforms that have not stemmed a rise in corporate and household debt levels which is now increasing at a faster rate than GDP growth. China was irritated by the call and essentially gave Moody’s the one finger high sign. While China has roughly $3 trillion in reserves some experts think they have $2 trillion plus in localized debt which increases the risk of economic trouble should default rates rise. Forbes Magazine pointed out that the last time China was downgraded was back in 1989 and since then they have grown like crazy. Forbes thinks the downgrade is not big deal but only time will tell since China has issues now that they never had back in ’89.
The markets will be closed Monday for Memorial Day when we remember those who died while serving in the armed forces of the United States. I will be taking the scouts to the local G.A.R. (Grand Army of the Republic) cemetery which was established by Civil War Union soldiers who had moved to Seattle after hostilities ended. We will do a service project, flag ceremony and have a scout read the Gettysburg address.